Lotte Group creates holding company structure

Lotte Group creates holding company structure

Lotte Group, South Korea’s fifth largest conglomerate, has started a new chapter with the creation of a holding company structure, delivering on its promise to fix complex cross-shareholding ties and further governance transparency.

On Thursday, the retail giant announced the formation of its holding company Lotte Corp. whose stocks will be traded on the main board Kospi from the end of this month. The company was capitalized at 4.89 trillion won ($4.32 billion) over an asset of 6.36 trillion won.

In August, shareholders of Lotte Shopping Co., Lotte Confectionery Co., Lotte Chilsung Beverage Co. and Lotte Food Co. agreed to split each company into a holding and operation unit. The holding entities were merged to create the new holding company.

One share of Lotte Confectionery would be swapped for 1.14 shares of Lotte Shopping, 8.23 shares of Lotte Chilsung Beverage and 1.78 shares of Lotte Food. The four affiliates, whose stock trading has been suspended since late September, will also be relisted later this month.

The transition into the holding structure, which began in 2015, has simplified the group’s cross-shareholding relations from 50 to 13.

Lotte Corp. will control 42 subsidiaries, or 138 including overseas operations, and manage brand licenses. The firm aims to expand its fleet of subsidiaries through M&As and equity acquisition. To finalize the transition, it also expects to combine with Hotel Lotte Co., which has served as the de facto holding firm of the conglomerate, over the next three years to make it the sole parent entity.

The transformation into a holding structure is expected to strengthen the grip of Shin Dong-bin, chairman of Lotte Group, who owns a 13 percent stake in the new holding entity. Shin Dong-joo, the elder brother, owns only 0.3 percent. A bitter family feud over control of the business empire is widely seen to have ended in victory for the current chairman.

The holding company held its first board meeting and appointed Shin Dong-bin, Hwang Gak-kyu and Lee Bong-chul as board members, with Shin and Hwang to serve as joint chief executives.

The new holding firm will start with a staff of 170 at 17 teams in six departments.